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What Should Landlords Collect for a Security Deposit?

HutchinsIn most circumstances, it is a given that landlords want to collect the largest security deposit possible in order to offset their risk. Landlords can use security deposits to compensate for monetary losses such as unpaid rent and/or damage to their property by the tenant. Did you know in the state of Arizona landlords are limited in the amount of security deposit that they can legally demand?

Per the Arizona Residential Landlord and Tenant Act:

Article 2 – Landlord Obligations 33-1321. Security deposits A.

“A landlord shall not demand or receive security, however denominated, including, but not limited to, prepaid rent in an amount or value in excess of one and one-half month’s rent. This subsection does not prohibit a tenant from voluntarily paying more than one and one-half month’s rent in advance.”

Landlords, please be aware you cannot demand that a tenant pay a security deposit more than one and one-half times a month’s rent! I see this happen frequently when landlords become concerned over what they see in an applicant’s job, rental history or credit report. Legally, you cannot do this!

Tenants, please be aware you may voluntarily pay a landlord more than one and one-half month’s rent in advance. This can be used as a strong negotiating tool for various reasons: lack of credit, poor credit, lack of rental history, lack of income, wanting to lease for a term that is less than landlord’s advertised lease term or trying to lease a highly desirable property.

It is very important to know the intricacies of the law when managing an income property, and can be very costly should you err in the process. Educate yourself or seek professional guidance from a licensed property management firm or legal counsel specializing in real estate law.

Also, it is very important to understand a tenant’s rights when renting a property. Tenants are frequently taken advantage of when they don’t understand their rights. They will acquiesce to unreasonable demands out of fear they may not have a home or worry about repercussions should they ask for repairs or maintenance. The Arizona Residential Landlord and Tenant Act is available online for both landlord and tenant information.

By Mike Hutchins

 

 

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